Term
| If standard deviation is used to measure the risk of stocks, one problem that arises is the inability to tell which stock is riskier by looking at the standard deviation alone. |
|
Definition
|
|
Term
| The variance or standard deviation measures the risk per unit of return. |
|
Definition
|
|
Term
| A higher coefficient of variation indicates more risk per unit of return. |
|
Definition
|
|
Term
| Standard deviation is stated in the same units of measurement (e.g., dollars, percent) as those of the data from which they were generated. |
|
Definition
|
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Term
| In an efficient market, both expected and unexpected news should cause stock prices to move up or down. |
|
Definition
|
|
Term
| A market system that allows for quick execution of customers’ trades is said to be informationally efficient. |
|
Definition
|
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Term
| Any predictable trend in the same direction as the price change would be evidence of an efficient market. |
|
Definition
|
|
Term
| In an efficient market, investors cannot consistently earn above average profits after taking risk differences into account. |
|
Definition
|
|
Term
| A weak-form efficient market is a market in which prices reflect all past information. |
|
Definition
|
|
Term
| The variance of a portfolio can be calculated by finding the variances of the individual components of the portfolio and finding the weighted average of those variances. |
|
Definition
|
|
Term
| Diversification occurs when we invest in several different assets rather than just a single one. |
|
Definition
|
|
Term
| The benefits of diversification are greatest when asset returns have positive correlations. |
|
Definition
|
|
Term
| Standard deviation is the square root of the variance. |
|
Definition
|
|
Term
| The coefficient of variation is a measure of total return on a stock. |
|
Definition
|
|
Term
| Unsystematic risk is the risk that cannot be eliminated through diversification. |
|
Definition
|
|
Term
| The market portfolio is a portfolio that contains all risky assets. |
|
Definition
|
|
Term
| The Capital Asset Pricing Model states that the expected return on an asset depends on its level of unsystematic risk. |
|
Definition
|
|
Term
| Beta measures the variability of an asset’s returns relative to the market portfolio. |
|
Definition
|
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Term
| Although gold is a risky investment by itself, including gold in a stock portfolio can make the portfolio less risky. |
|
Definition
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Term
| If Stock A has a higher standard deviation than Stock B, it will also have a greater coefficient of variation. |
|
Definition
|
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Term
| If the expected return is 10%, the standard deviation is 3%, about 68% of the time returns will be expected to fall between 10% and 13%. |
|
Definition
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Term
| In general, large company stocks are more risky than Treasury bonds. |
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Definition
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|
Term
| Future returns and risk cannot be predicted precisely from past measures. |
|
Definition
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Term
| A stock that went from $40 per share at the beginning of the year to $45 at the end of the year and paid a $2 dividend provided an investor with a 14% return. |
|
Definition
F
dollar return = $45 - $40 + $2 = $7 → % return=$7/$40=17.5% |
|
|
Term
| When we speak of ex-ante returns, we are referring to historical information or data. |
|
Definition
|
|
Term
| In general, securities with higher historical standard deviations have provided higher returns. |
|
Definition
|
|
Term
| The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient. |
|
Definition
|
|
Term
| Research suggests that a portfolio of 20 or 30 different stocks can eliminate most of a portfolio’s systematic risk. |
|
Definition
|
|
Term
| A portfolio is any combination of financial assets or investments. |
|
Definition
|
|
Term
| The expected rate of return on a portfolio is the weighted average of the expected returns of the individual assets in the portfolio. |
|
Definition
|
|
Term
| The historical percentage return for a single financial asset is equal to any dividends received minus the difference between the selling price and the purchase price, all divided by the purchase price. |
|
Definition
|
|
Term
| The variance is the square root of the standard deviation. |
|
Definition
|
|
Term
| If a financial asset has a historical variance of 16, then its standard deviation must be 4. |
|
Definition
|
|
Term
| If a financial asset has a historical variance of 25, then its standard deviation must be 12.5%. |
|
Definition
|
|
Term
| The coefficient of variation measures the risk per unit of return. |
|
Definition
|
|
Term
| The term “ex-ante” refers to the past or historical information. |
|
Definition
|
|
Term
| The term “ex-ante” refers to expected or forecasted information. |
|
Definition
|
|
Term
| A weak-form efficient market is one in which prices reflect all public and private knowledge, including past and current information. |
|
Definition
|
|
Term
| A strong-form efficient market is one in which prices reflect all public knowledge, including past and current information. |
|
Definition
|
|
Term
| A weak-form efficient market is one in which prices reflect all public knowledge, including past and current information. |
|
Definition
|
|
Term
| If a market is semi-strong form efficient, it also is by definition weak-form efficient. |
|
Definition
|
|
Term
| The return on a portfolio is simply equal to the weighted average return of the securities that comprise it. |
|
Definition
|
|
Term
| The risk of a portfolio is simply equal to the weighted average variance of the securities that comprise it. |
|
Definition
|
|
Term
| The greatest level of risk reduction through diversification can be achieved when combining two securities whose returns are perfectly negatively correlated. |
|
Definition
|
|
Term
| Most nondiversifiable risk can be eliminated by creating a portfolio of around 30 stocks. |
|
Definition
|
|
Term
| The only relevant risk for investors that hold well diversified portfolios of securities is nondiversifiable risk. |
|
Definition
|
|
Term
| Most market risk can be eliminated through diversification. |
|
Definition
|
|
Term
| In general, securities with lower returns have lower historical standard deviations. |
|
Definition
|
|
Term
1. A stock that went from $40 per share at the beginning of the year to $45 at the end of the year and paid a $2 dividend provided an investor with a ____ return.
a. 8.75%
b. 14%
c. 17.5%
d. 7%
e. none of the above |
|
Definition
c. 17.5%
dollar return = $45 - $40 + $2 = $7 →% |
|
|
Term
2. The slope of the linear relation between the returns on a stock and the returns on the market portfolio is called the:
a. alpha
b. beta
c. covariance
d. coefficient of variance |
|
Definition
|
|
Term
3. The Security Market Line describes the relationship between the:
a. expected return on securities and their systematic risk
b. expected return on securities and their unsystematic risk
c. expected return on a security and the expected return on the market portfolio
d. risk-free rate and the expected return on the market portfolio |
|
Definition
| a. expected return on securities and their systematic risk |
|
|
Term
4. Unsystematic risk is also known as:
a. market risk
b. nondiversifiable risk
c. firm-specific risk
d. macroeconomic risk |
|
Definition
|
|
Term
5. The market portfolio would have a beta of:
a. 0
b. 1
c. 1
d. 0.8 |
|
Definition
|
|
Term
6. An aggressive (that is, higher risk) portfolio would have a beta of:
a. 1
b. 0
c. less than 1 but greater than 0
d. more than 1 |
|
Definition
|
|
Term
7. As defined in accordance with efficient markets notions, a weak-form efficient market would be a market in which asset prices reflect all:
a. current information
b. past information
c. inside information
d. public information |
|
Definition
|
|
Term
8. As defined in accordance with efficient markets notions, a strong-form efficient market would be a market in which asset prices reflect all:
a. past information
b. current information
c. public information
d. public and private information |
|
Definition
| d. public and private information |
|
|
Term
9. After controlling for risk, if someone were able to earn greater than the average returns for the market on a consistent basis using publicly available information, which form of market efficiency is violated?
a. none of forms would be violated
b. semi-strong
c. strong
d. all of the forms of market efficiency would be violated, |
|
Definition
|
|
Term
10. If prices in a particular market fully reflect all public and private knowledge, the market is efficient in the:
a. weak form
b. semi-strong form
c. strong form
d. both a and b |
|
Definition
|
|
Term
11. The correlation between the return on the risk-free asset with a constant return over time and the return on a risky asset is always:
a. 1
b. 0
c. 1
d. 0.5 |
|
Definition
|
|
Term
12. If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the market portfolio is 18%, the expected return on IBM is:
a. 17.2%
b. 20.4%
c. 22.1%
d. 23.6% |
|
Definition
b. 20.4%
E(R) = 6% + (18% - 6%)1.2 = 6% + 12%(1.2) = 20.4% |
|
|
Term
13. If the expected return on Stock 1 is 6%, and the expected return on Stock 2 is 20%, the expected return on a two-asset portfolio that holds 10% of its funds in Stock 1 and 90% in Stock 2 is:
a. 11.52%
b. 13%
c. 18.6%
d. 19.14% |
|
Definition
c. 18.6%
(10%) (6%) + (90%)(20%) = 0.6% + 18% = 18.6% |
|
|
Term
14. In an efficient market:
a. it is fairly easy to find stocks whose prices do not fairly reflect the present value of future expected cash flows
b. expected news will cause a rapid change in prices
c. information flows are random, both in timing and in content
d. all the above |
|
Definition
| c. information flows are random, both in timing and in content |
|
|
Term
15. The strong-form efficient market implies that:
a. no investor can consistently beat the market after adjusting for risk differences
b. stock prices reflect all public and private knowledge
c. even corporate officers and insiders cannot earn above-average, risk-adjusted profits
d. all of the above |
|
Definition
a. no investor can consistently beat the market after adjusting for risk differences
b. stock prices reflect all public and private knowledge
c. even corporate officers and insiders cannot earn above-average, risk-adjusted profits
answer:d. all of the above |
|
|
Term
16. Systematic risk is rewarded with higher returns in the market because:
a. it is associated with market movements which cannot be eliminated through diversification
b. it is a microeconomic risk
c. that risk is unique to a firm or an industry
d. none of the above |
|
Definition
| a. it is associated with market movements which cannot be eliminated through diversification |
|
|
Term
17. If the expected return on the market portfolio is 12%, and the beta on Consolidated Edison is .8, then using the Security Market Line, the expected return on Con Ed is:
a. greater than 12%
b. less than 12%
c. greater or less than 12%, depending on the risk-free rate of return
d. dependent on some other factors |
|
Definition
b. less than 12%
RFR < 12% → E(RCon Ed) = RFR + (12% - RFR)(0.8) < 12% |
|
|
Term
18. The security market line can be used to determine the expected return on a security if we know the:
a. risk-free rate
b. systematic risk of that security
c. market risk premium
d. all of the above |
|
Definition
a. risk-free rate
b. systematic risk of that security
c. market risk premium
answer:d. all of the above |
|
|
Term
19. The Capital Asset Pricing Model (CAPM) states that the expected return on an asset depends upon its level of:
a. systematic risk
b. unsystematic risk
c. all of the above
d. none of the above |
|
Definition
|
|
Term
20. If the risk-free rate, the expected return on the market portfolio, and the _____________ of a stock is known, an investor can use the security market line to determine the expected return on that stock.
a. standard deviation
b. beta
c. coefficient of variation
d. unsystematic risk |
|
Definition
|
|
Term
21. The portfolio that contains all risky assets is known as the:
a. market portfolio
b. efficient portfolio
c. efficient frontier
d. value-weighted portfolio |
|
Definition
|
|
Term
22. If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:
a. 12.4%
b. 13%
c. 13.6%
d. 14.5% |
|
Definition
c. 13.6%
E(Rp) = (40%)(10%) + (60%)(16%) = 4% + 9.6% = 13.6% |
|
|
Term
23. Which of the following is not required to compute the expected return of a three-asset portfolio?
a. the amount invested in each stock
b. the correlation between the returns on each stock
c. the expected return on each stock
d. all of the above are required |
|
Definition
| b. the correlation between the returns on each stock |
|
|
Term
24. The benefits of diversification are greatest when asset returns have:
a. negative correlations
b. positive correlations
c. zero correlations
d. low positive covariances |
|
Definition
|
|
Term
25. In an efficient market which of the following would not be expected to cause a quick price change in the stock of a company?
a. an unexpected announcement by a major competitor
b. higher than predicted earnings announcement
c. unexpected death of CEO
d. all the above would be expected to cause a quick price change |
|
Definition
| d. all the above would be expected to cause a quick price change |
|
|
Term
26. Which of the following statements is most correct?
a. The variance of a portfolio is a weighted average of asset variances.
b. The benefits of diversification are greatest when asset returns have zero correlations.
c. The market portfolio truly eliminates all unsystematic risk.
d. Beta is the measure of an asset’s unsystematic risk. |
|
Definition
| c. The market portfolio truly eliminates all unsystematic risk. |
|
|
Term
27. Which of the following statements is most correct?
a. The U.S. stock market appears to be a fairly good example of a semi-strong form efficient market.
b. A market in which prices reflect all past and current publicly known information is a strong form efficient market.
c. A weak-form efficient market implies that technical analysis can be used to predict future price movements.
d. All of the above statements are correct. |
|
Definition
| a. The U.S. stock market appears to be a fairly good example of a semi-strong form efficient market. |
|
|
Term
28. Which of the following statements is most correct?
a. The security market line graphically shows the expected return and systematic risk relationship.
b. Unsystematic risk is the major determinant of returns for individual assets.
c. Assets that have greater systematic risk than the market have betas greater than 0.0.
d. All of the above statements are correct. |
|
Definition
| a. The security market line graphically shows the expected return and systematic risk relationship. |
|
|
Term
29. Which of the following statements is false?
a. Diversification cannot eliminate risk that is inherent in the macroeconomy or market risk.
b. The expected rate of return on a portfolio does not depend on the correlation between the return on each stock.
c. Although gold is a risky investment by itself, including gold in a stock portfolio may reduce total risk of the portfolio.
d. All of the above statements are correct. |
|
Definition
a. Diversification cannot eliminate risk that is inherent in the macroeconomy or market risk.
b. The expected rate of return on a portfolio does not depend on the correlation between the return on each stock.
c. Although gold is a risky investment by itself, including gold in a stock portfolio may reduce total risk of the portfolio.
answer:d. All of the above statements are correct. |
|
|
Term
30. If Stock A had a price of $120 at the beginning of the year, $150 at the end of the year and paid a $6 dividend during the year, what would be the annualized holding period return?
a. 36%
b. 30%
c. 24%
d. none of the above |
|
Definition
b. 30%
dollar return = $150 - $120 + $6 = $36 → % |
|
|
Term
31. If the variance for Stock A is greater than the variance for Stock B, then the standard deviation for Stock A:
a. is greater than the standard deviation for Stock B
b. is less than the standard deviation for Stock B
c. is the same as the standard deviation for stock b
d. cannot be determined by this information |
|
Definition
| a. is greater than the standard deviation for Stock B |
|
|
Term
32. If the variance for Stock A is greater than the variance for Stock B, then the coefficient of variation for Stock A:
a. is greater than the coefficient of variation for Stock B
b. is less than the coefficient of variation for Stock B
c. is the same as the coefficient of variation for stock b
d. cannot be determined by this information |
|
Definition
| d. cannot be determined by this information |
|
|
Term
Answer: d p 318 and Equation 12-4
33. If the variance in returns for Stock A is 400% and the expected return is 5%, then the coefficient of variation is:
a. 4
b. 80
c. .25
d. cannot be determined by this information |
|
Definition
|
|
Term
34. According to the definitions given in the text, if Stock A has a standard deviation of 4% and Stock B has a standard deviation of 3% which stock is riskier?
a. Stock A
b. Stock B
c. they are equally risky
d. cannot determine from the information given |
|
Definition
| d. cannot determine from the information given |
|
|
Term
35. According to the definitions given in the text, if Stock A has a standard deviation of 4% and expected returns of 9%, and Stock B has a standard deviation of 3% and expected returns of 1%, which stock is riskier?
a. Stock A
b. Stock B
c. they are equally risky
d. cannot determine from the information given |
|
Definition
|
|
Term
36. A fruit company has 20% returns in periods of normal rainfall and –3% returns in droughts. The probability of normal rainfall is 60% and droughts 40%. What would the fruit company’s expected returns be?
a. 24%
b. 10.8%
c. 0
d. cannot determine from the information given |
|
Definition
b. 10.8%
E(R) = (60%)(20%) +(40%)(-3%) = 12% - 1.2% = 10.8% |
|
|
Term
37. If Stock A is considered to be of lower risk than Stock B, then Stock A should have returns that are
a. lower than Stock B
b. higher than Stock B
c. they would have equal returns
d. cannot determine from the information given |
|
Definition
|
|
Term
38. If the expected returns for Stock A are 3% and this year’s returns are 3%, next year’s returns would be
a. 3%
b. 6%
c. cannot say for certain
d. 4.5% |
|
Definition
| c. cannot say for certain |
|
|
Term
39. Which one of the following is not considered to be a generally recognized type of market efficiency?
a. strong-form
b. semi-strong form
c. weak-form
d. insider-information form |
|
Definition
| d. insider-information form |
|
|
Term
40. A statistical concept that relates movements in one set of returns to movements in another set over time is called:
a. variance
b. standard deviation
c. coefficient of variation
d. correlation |
|
Definition
|
|
Term
41. The total risk of a well-diversified portfolio of U.S. stocks appears to be about what proportion of the risk of an average one-stock portfolio?
a. one-third
b. one-half
c. two-thirds
d. three-fourths |
|
Definition
|
|
Term
42. The total risk of a well-diversified international portfolio of stocks appears to be about what proportion of the risk of an average one-stock portfolio?
a. one-quarter
b. one-third
c. one-half
d. two-thirds
e. three-fourths |
|
Definition
|
|
Term
43. Portfolio risk is comprised of:
a. systematic and market risk
b. unsystematic and microeconomic risk
c. systematic and unsystematic risk
d. systematic and macroeconomic risk |
|
Definition
| c. systematic and unsystematic risk |
|
|
Term
44. Which of the following is not a component of the security market line equation?
a. risk-free rate
b. expected return on the market
c. an asset’s systematic risk
d. an asset’s unsystematic risk |
|
Definition
| d. an asset’s unsystematic risk |
|
|
Term
45. The square root of the standard deviation is called the:
a. variance
b. coefficient of variation
c. beta
d. none of the above |
|
Definition
a. variance
b. coefficient of variation
c. beta
answer:d. none of the above |
|
|
Term
46. If we assume that asset X has an expected return of 10 and a variance of 10, then its coefficient of variation is: (Pick the closest answer.)
a. 3.162
b. 1.000
c. 0.316
d. 0.032 |
|
Definition
|
|
Term
47. Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:
a. -1.0
b. +1.0
c. 0.0
d. none of the above |
|
Definition
|
|
Term
48. Variations in operating income over time because of variations in unit sales, price, cost margins, and/or fixed expenses are called:
a. business risk
b. exchange rate risk
c. purchasing power risk
d. financial risk
e. none of the above |
|
Definition
|
|
Term
49. Variations in operating income over time because of variations in unit sales, price, cost margins, and/or fixed expenses are called:
a. interest rate risk
b. exchange rate risk
c. purchasing power risk
d. financial risk
e. none of the above |
|
Definition
a. interest rate risk
b. exchange rate risk
c. purchasing power risk
d. financial risk
answer:e. none of the above |
|
|
Term
50. The effect on revenues and expenses from variations in the value of the U.S. dollar in terms of other currencies is called:
a. interest rate risk
b. exchange rate risk
c. purchasing power risk
d. financial risk
e. none of the above |
|
Definition
|
|
Term
51. The effect on revenues and expenses from variations in the value of the U.S. dollar in terms of other currencies is called:
a. interest rate risk
b. business risk
c. purchasing power risk
d. financial risk
e. none of the above |
|
Definition
a. interest rate risk
b. business risk
c. purchasing power risk
d. financial risk
answer:e. none of the above |
|
|
Term
52. The risk caused by changes in inflation that affect revenues, expenses and profitability is called:
a. interest rate risk
b. business risk
c. purchasing power risk
d. financial risk
e. none of the above |
|
Definition
|
|
Term
53. The risk caused by changes in inflation that affect revenues, expenses and profitability is called:
a. interest rate risk
b. business risk
c. tax risk
d. financial risk
e. none of the above |
|
Definition
a. interest rate risk
b. business risk
c. tax risk
d. financial risk
answer:e. none of the above |
|
|
Term
54. The risk caused by variations in interest expense unrelated to sales or operating income arising from changes in the level of interest rates in the economy is called:
a. interest rate risk
b. business risk
c. tax risk
d. financial risk
e. none of the above |
|
Definition
|
|
Term
55. The risk caused by variations in interest expense unrelated to sales or operating income arising from changes in the level of interest rates in the economy is called:
a. financial risk
b. business risk
c. tax risk
d. purchasing power risk
e. none of the above |
|
Definition
a. financial risk
b. business risk
c. tax risk
d. purchasing power risk
answer:e. none of the above |
|
|
Term
56. The risk caused by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:
a. interest rate risk
b. business risk
c. financial risk
d. purchasing power risk
e. none of the above |
|
Definition
|
|
Term
57. The risk caused by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:
a. interest rate risk
b. business risk
c. tax risk
d. purchasing power risk
e. none of the above |
|
Definition
a. interest rate risk
b. business risk
c. tax risk
d. purchasing power risk
answer:e. none of the above |
|
|
Term
58. Variations in a firm’s tax rate and tax-related charges over time due to changing tax laws and regulations is called:
a. interest rate risk
b. business risk
c. exchange rate risk
d. purchasing power risk
e. none of the above |
|
Definition
a. interest rate risk
b. business risk
c. exchange rate risk
d. purchasing power risk
answer:e. none of the above |
|
|
Term
59. Assume the probability of a pessimistic, most likely and optimistic state of nature is .25, .45 and .30, and the returns associated with those states of nature are 10%, 12%, and 16% for asset X. Based on this information, the expected return and standard deviation of return are: (Pick the closest answer.)
a. 12.0% and 4.0%
b. 12.7% and 2.3%
c. 12.7% and 4.0%
d. 12.0% and 2.3%
e. 12.9% and 5.30% |
|
Definition
b. 12.7% and 2.3%
E(R) = (.25)(10%)+(.45)(12%)+(.30)(16%) = 2.5% + 5.4% + 4.8% = 12.70%
σ2 = (.25)(10%-12.7%)2 + (.45)(12%-12.7%)2 + (.30)(16%-12.7%)2 =
1.8225 + 30.2205 + 3.267 = 5.2945 → |
|
|
Term
60. The ____________ the coefficient of variation, the ____________ the risk.
a. lower, lower
b. higher, lower
c. lower, higher
d. more stable, higher
e. none of the above |
|
Definition
|
|
Term
61. Assume the probability of a pessimistic, most likely and optimistic state of nature is .25, .55 and .20, and the returns associated with those states of nature are 5%, 10%, and 13% for asset Y. Based on this information, the expected return, standard deviation, and coefficient of variation for asset Y are: (Pick the closest answer.)
a. 10.50%, 2.96% and 0.395 respectively
b. 10.35%, 2.86% and 0.345 respectively
c. 9.35%, 7.63% and 0.816 respectively
d. 9.35%, 2.76% and 0.295 respectively
e. none of the above |
|
Definition
d. 9.35%, 2.76% and 0.295 respectively
E(R) = (0.25)(5%) + (0.55)(10%) + (0.20)( 13%) = 1.25% 5.5% + 2.6% = 9.35%
σ2 = (.25)(5%-9.35%)2+(.55)(10%-9.35%)2+(.20)(13%-9.35%)2 = 4.7306 + 0.2324 + 2.6645 = 7.6275 → |
|
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Term
62. Rico bought 100 shares of Banana Republic stock for $24.00 per share on January 1, 2010. He received a dividend of $2.00 per share at the end of 2010 and $3.00 per share at the end of 2011. At the end of 2012, Rico collected a dividend of $4.00 per share and sold his stock for $18.00 per share. What was Rico’s realized holding period return?
a. -12.5%
b. 12.5%
c. -16.7%
d. 16.7%
e. none of the above |
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Definition
b. 12.5%
Dollar Return = ($18 - $24) + $2 + $3 + $4 = $3 |
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Term
63. If a person requires greater return when risk increases, that person is said to be:
a. risk seeking
b. risk averse
c. risk aware
d. risk indifferent
e. none of the above |
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Definition
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Term
64. Which of the following statements is most correct?
a. Combining positively correlated assets having the same expected return results in a portfolio with the same level of expected return and a lower level of risk.
b. Combining negatively correlated assets having the same expected return results in a portfolio with the same level of expected return and a lower level of risk.
c. Combining positively correlated assets having the same expected return results in a portfolio with a lower level of expected return and a lower level of risk.
d. Combining negatively correlated assets having the same expected return results in a portfolio with a lower level of expected return and a lower level of risk.
e. all of the above |
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Definition
| b. Combining negatively correlated assets having the same expected return results in a portfolio with the same level of expected return and a lower level of risk. |
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Term
65. Which of the following statements is most correct?
a. Perfectly negatively correlated series move exactly together and have a correlation coefficient of -1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of +1.0.
b. Perfectly negatively correlated series move exactly together and have a correlation coefficient of +1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0.
c. Perfectly positively correlated series move exactly together and have a correlation coefficient of +1.0 while perfectly negatively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0.
d. Perfectly positively correlated series move exactly together and have a correlation coefficient of -1.0 while perfectly positively correlated series move exactly in opposite directions and have a correlation coefficient of +1.0.
e. none of the above |
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Definition
| c. Perfectly positively correlated series move exactly together and have a correlation coefficient of +1.0 while perfectly negatively correlated series move exactly in opposite directions and have a correlation coefficient of -1.0. |
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